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Inflation and Stabilization in Albania

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Author Info

  • Sulo Haderi
  • Harry Papapanagos

    ()

  • Peter Sanfey

    ()

  • Mirela Talka

Abstract

This paper analyses the determinants of inflation in Albania during the transition period. We attempt to explain how albania has been so successful in reducing inflation to a level comparable to many countries in the European Union. We discuss the relative importance of monetary, fiscal, and external variables, and in particular, we highlight the role of remittances and private transfers by emigrants. Using vector autoregression analysis, we demonstrate how shocks to remittances affect the subsequent paths of inflation and the exchange rate. Our main conclusion is that, while there are important lessons from the Albanian experience for other ex-communist countries, the presence of large-scale emigration and huge remittance flows make Albania unique among European countries in transition, to the extent that these factors aided the anti-inflation programme.

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Bibliographic Info

Paper provided by Department of Economics, University of Kent in its series Studies in Economics with number 9613.

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Date of creation: Sep 1996
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Publication status: Published in Post-Communist Economies, 1999, 11(1), pp.127-141
Handle: RePEc:ukc:ukcedp:9613

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Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/

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Keywords: Inflation; Stabilization; Remittances; Albania;

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References

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  1. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
  2. S. Fisher & R. Sahay & C. A. Vegh, 1997. "Stabilization and Growth in Transition Economies: The Early Experience," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 5.
  3. Richard Layard & Ansgar Richter, 1994. "Who Gains and Who Loses from Russian Credit Expansion," CEP Discussion Papers dp0200, Centre for Economic Performance, LSE.
  4. Peter J. Montiel, 1989. "Empirical Analysis of High-Inflation Episodes in Argentina, Brazil, and Israel," IMF Staff Papers, Palgrave Macmillan, vol. 36(3), pages 527-549, September.
  5. Stanley Fischer & Carlos A. Végh Gramont & Ratna Sahay, 1996. "Stabilization and Growth in Transition Economies," IMF Working Papers 96/31, International Monetary Fund.
  6. Aslund Anders, 1994. "Lessons of the First Four Years of Systemic Change in Eastern Europe," Journal of Comparative Economics, Elsevier, vol. 19(1), pages 22-38, August.
  7. Carlos A. Végh Gramont, 1991. "Stopping High Inflation," IMF Working Papers 91/107, International Monetary Fund.
  8. Ahmet Mancellari & Harry Papapanagos & Peter Sanfey, 1996. "Job creation and temporary emigration: the Albanian experience," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 4(2), pages 471-490, October.
  9. Sachs, Jeffrey D, 1996. "Economic Transition and the Exchange-Rate Regime," American Economic Review, American Economic Association, vol. 86(2), pages 147-52, May.
  10. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
  11. Thomas D. Willett & Fahim Al-Marhubi, 1994. "Currency Policies for Inflation Control in the Formerly Centrally Planned Economies," The World Economy, Wiley Blackwell, vol. 17(6), pages 795-815, November.
  12. Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping Hyperinflations Past and Present," NBER Working Papers 1810, National Bureau of Economic Research, Inc.
  13. Calvo, Guillermo A & Vegh, Carlos A, 1995. "Fighting Inflation with High Interest Rates: The Small Open Economy Case under Flexible Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 49-66, February.
  14. R. B. Johnston & Piroska Mohácsi Nagy & Roy Pepper & Mauro Mecagni & Ratna Sahay & Mario I. Bléjer & Richard Hides, 1992. "Albania," IMF Occasional Papers 98, International Monetary Fund.
  15. Ratna Sahay & Carlos A. Vegh, 1996. "Inflation and stabilization in transition economies: An analytical interpretation of the evidence," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(1), pages 75-108.
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Citations

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Cited by:
  1. Dabalen, Andrew & Kilic, Talip & Wane, Waly, 2008. "Social Transfers, Labor Supply and Poverty Reduction: The Case of Albania," Policy Research Working Paper Series 4783, The World Bank.
  2. Muco, Marta & Papapanagos, Harry & Sanfey, Peter, 1999. "The Determinants of Official and Free-Market Exchange Rates in Albania during Transition," Journal of Comparative Economics, Elsevier, vol. 27(3), pages 534-552, September.

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